Investment Property Cash Flow Calculator

Rental Cash Flow and Taxable Results

Rental cash flow is the rent received less every amount paid out for the property during the year, including principal repayments. The taxable rental result is the rent less deductible expenses, including deductions that cost no cash this year. The two figures differ because some payments are not deductions and some deductions are not payments.

Loan interest counts in both columns. Principal repayments count only in cash flow. Each principal-and-interest repayment has an interest part and a principal part. The ATO's interest expenses guidance allows a deduction for interest on money borrowed to buy a rental property, but not for payments that reduce the principal.

Rental costs can have different tax treatment. The ATO's common property expenses guidance explains deductible costs and the limits on body corporate levies. Enter only the deductible portion in the property-cost fields. Repairs to existing damage and capital improvements can have different treatment.

Borrowing expenses include eligible loan establishment costs and lenders mortgage insurance. Under the ATO's borrowing expenses rules, expenses above $100 are generally spread over five years or a shorter loan term. The first year's deduction also depends on the loan's timing. Enter the applicable annual deduction instead of the total fees.

If you pay borrowing fees this year, enter the payment under non-deductible cash costs as well. That records the cash payment separately from its annual tax deduction. Enter capital works and depreciation deductions from your schedule, with any current cash purchase included separately.

Enter a capital improvement or the private share of a cost as a non-deductible cash cost. It lowers cash flow without increasing the tax loss.

In the hypothetical starting figures, rent of $600 a week with 2 vacant weeks gives $30,000. Interest at 6% on $500,000 is $30,000. After $7,000 of deductible costs and $6,000 of principal, the cash shortfall before tax is $13,000. The taxable column replaces principal with $4,000 of depreciation and the $300 entered borrowing deduction. That gives a taxable rental loss of $11,300.

Applying an Entered Tax Assumption

The indicative tax effect applies your entered marginal rate to the taxable rental result. A loss gives a positive benefit and a profit gives a negative tax cost. In the example, a $11,300 loss at 30% could reduce tax by $3,390. The $13,000 cash shortfall becomes $9,610 after tax, or $185 a week. A taxable profit works the other way, and the calculator deducts the extra tax from cash flow.

This figure shows how a loss could interact with the rate you enter. It is not a refund estimate or a figure for a tax return. A single rate ignores tax brackets, so it overstates the effect when a large loss moves income into a lower bracket or exceeds the owner's other income.

Whether a loss can reduce tax on other income depends on the rules for the property and its owner. Read how negative gearing works in Australia for the policy context. To model no current-year benefit, choose "No benefit this year". The starting example then has no tax effect and keeps its $13,000 cash shortfall.

Enter every amount for the whole property, then set the ownership share. The ATO's rental expense apportionment rules require co-owners to split rental income and expenses by their legal interest. At 50% ownership, the example owner's cash shortfall is $6,500, the taxable loss is $5,650 and the after-tax shortfall is $4,805.

Testing an Investment Scenario

The scenario table changes one input at a time and shows how far after-tax cash flow moves from the current figures. A 1 percentage point rate rise adds $5,000 of interest in the example. After-tax cash flow falls by $3,500, because the entered tax rate offsets part of the extra interest.

Two more vacant weeks remove $1,200 of rent and lower after-tax cash flow by $840. A $2,000 rise in deductible costs lowers it by $1,400. A $20 weekly rent rise over the 50 let weeks improves it by $700. With all four changes together, after-tax cash flow falls by $5,068.

These results describe the owner's cash flow, not a lender's serviceability assessment. A lender tests whether the client can afford the loan using its own assumptions for rent, expenses and interest rates. Its test also counts the client's other debts. Use the borrowing power calculator to estimate that limit. The rental yield calculator measures the property's return on its value before finance.